top of page

� Average And Marginal Propensities To Save (Aps And Mps)

Economics notes

� Average And Marginal Propensities To Save (Aps And Mps)

➡️ Estimation of the total cost of production: This involves calculating the cost of labor, materials, and other inputs necessary to produce a good or service.

➡️ Estimation of the total revenue generated: This involves calculating the total amount of money received from the sale of goods or services.

➡️ Estimation of the profit or loss: This involves subtracting the total cost of production from the total revenue generated to determine the net profit or loss.

What is the difference between average propensity to save (APS) and marginal propensity to save (MPS)?

APS is the ratio of total savings to total income, while MPS is the proportion of additional income that is saved. APS reflects the overall saving behavior of an individual or economy, while MPS shows how much of each additional dollar earned is saved.

How do changes in income affect APS and MPS?

As income increases, APS generally decreases because people tend to spend a larger proportion of their income. MPS, on the other hand, may increase or decrease depending on the individual's saving behavior. If the individual saves a larger proportion of their additional income, MPS will be higher, and vice versa.

How do APS and MPS impact the economy?

APS and MPS are important determinants of the overall level of saving in an economy. Higher APS and MPS can lead to higher levels of investment, which can stimulate economic growth. However, if APS and MPS are too high, it can lead to a decrease in consumption and a slowdown in economic activity. Therefore, policymakers need to strike a balance between encouraging saving and promoting consumption to maintain a healthy economy.

bottom of page